"If you believe that the plan options available in the Marketplace in your area are more expensive than your cancelled health insurance policy, you will be eligible for catastrophic coverage if it is available in your area," the CMS says. "In order to purchase this catastrophic coverage, you need to complete a hardship exemption form, and indicate that your current health insurance policy is being cancelled and you consider other available policies unaffordable."
"Like all individuals who get a hardship exemption in 2014, these individuals will be eligible to buy a catastrophic plan but even if they do not they will not be subject to a penalty. The hardship exemption is included in the law because we recognize that there are certain temporary circumstances that could make it difficult for individuals to afford any health coverage," an administration spokesperson said.
"But keep in mind - these are people who had coverage and want to remain covered and now we are giving them more options to do so," the spokesperson added.
Health and Human Services Department spokeswoman Joanne Peters said it's a "common sense clarification". "For the limited number of consumers whose plans have been cancelled and are seeking coverage, this is one more option," she said.
(Read more: White House: May extend Obamacare deadlines again)
Insurers were unhappy. "This latest rule change could cause significant instability in the marketplace and lead to further confusion and disruption for consumers," said America's Health Insurance Plans' (AHIP) President and CEO Karen Ignagni.
The administration has pushed back deadlines and softened rules for people who are trying to buy health insurance before the end of the year.
A week ago, federal officials gave people struggling to buy health insurance until Dec. 31 to pay their first premiums for coverage starting the very next day, and asked insurance companies to extend other deadlines, too. Health insurers have since offered to extend this time until Jan 10.